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They are calling it a vision that may turn into a nightmare. Shabby planning and execution of the government’s economic development plan, named Vision 2025, may not only fail to deliver high economic growth, it will leave the nation even more indebted than before.

The discourse on economic planning and policy in Pakistan has largely been devoid of facts and evidence. Instead of relying on sound economic policy driven by evidence-based planning, economic policy-making has largely been an exercise in wishful thinking. If the current government is serious in pursuing a high economic growth agenda to reduce poverty and improve human development in Pakistan, it must consult informed experts and opinions, rather than relying on self-proclaimed economic rainmakers who have largely been the architects of past policies that have left Pakistan deeply indebted to the lenders of the last resort.

Pakistan simultaneously faces unique opportunities and threats. On one hand is the demographic dividend with one of the largest working age population in the world. On the other lies an equally large infrastructure deficit that may pre-empt the demographic divided from delivering prosperity. Pakistan can, through careful planning, invest in infrastructure development to capitalise on her demographic dividend to achieve high economic growth.

In a recently released paper by the World Bank, Jouko Kinnunen and Hans Lofgren argued that carefully planned infrastructure investments in Pakistan have the capacity to improve human development by reducing poverty and unemployment, and by improving progress towards achieving Millennium Development Goals (MDGs) by 2022. Using a state-of-the-art macroeconomic model developed specifically for Pakistan, the authors simulated several scenarios for infrastructure investments in Pakistan and concluded that investments in infrastructure financed by achieving savings from eliminating other wasteful government spending will not only increase the rate of economic growth from 4.5 per cent to almost 7 per cent, it will also improve human development indicators in Pakistan.

The authors developed future growth scenarios with the specific aim of increasing the annual GDP growth from the 4 per cent to 5 per cent range to 7 per cent during 2013 and 2022. They were equally interested in exploring ways to create fiscal space for increased spending on infrastructure. The two avenues explored included increase in domestic taxes and reduction in non-developmental government spending.

The subsidizers and their discontents

Given the sustained political instability in Pakistan, each government tries to win over the voters by offering them short-term relief through subsidies on, among others, fuel and food staples. Such short-term thinking may help the incumbents win the next elections, however, these myopic policies fail to deliver in the long run. “Transfer programs can generate immediate welfare gains but are less effective over time unless they are designed to raise productivity, perhaps via improvements in health, nutrition, and education outcomes,” they noted.

The authors instead argue that rapid economic growth requires significant increases in savings, investments, and total factor productivity (economic output that is not accounted for by typical inputs, such as labour and capital).

The authors noted that infrastructure investments achieved by curbing growth in wasteful spending, i.e. spending that does not impact productivity, welfare, or human development, has the highest welfare and growth effects. They also found that infrastructure investments funded by increase in domestic taxation or a reduction in energy subsidies did not have the same positive effects as the ones achieved from a cut in wasteful spending by the government.

The authors noted that infrastructure investments funded by increase in domestic taxes had a marginal impact on GDP growth and an impeding impact on private consumption and poverty reduction. Instead, a fiscal space created by eliminating wasteful government spending reported the highest acceleration in economic growth and poverty reduction. The authors have shown that a high growth scenario can bring the unemployment rate from 8.6 per cent under business as usual to 3.1 per cent in 2022. At the same time, human development indicators measured in terms of Millennium Development Goals will also improve significantly.

It is possible for Pakistan to achieve a 7 per cent economic growth rate by 2022. However, this will require careful planning, efficient execution, and responsible governance. The World Bank paper is therefore a must read for those entrusted with the task of devising fiscal policy in Pakistan. The economic analysis presented in the paper allows the planners to test their hypothesis using simulations before committing billions of dollars to projects that may never live up to their assumed benefits.

Comments (20) Closed

kdspirited

Aug 21, 2013 01:56pm

Murtaza

Thank you for writing this article. This is why when asked why do our lawmaker need degrees to be in power? This is why so they can read and understand research and white papers on economic growth absord it and then execute against it. The level of education of our so called politicians leaves a lot to be desired they are therefore incapabale of making educated decisions about the futre of Pakistan. Secondly if people continue to be put into roles of responsibility based on their political relationships instead of merit we will not have the correct manpower to execute any economic policy in this country. If we as Pakistanis dont stop repeating our past and brining the same faces into power we will never progress. This is the true definition of insanity and we as a nation are living proof of it

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A. Ercelan

Aug 21, 2013 03:36pm

"The astonishing and historically unprecedented acceleration of Chinese economic growth in the mid-1970s did nothing to accelerate rates of improvement in infant and child mortality, indeed quite the reverse."

never trust the world bank.

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Inam

Aug 21, 2013 04:27pm

The author analysed the economic situation of Pakistan thoroughly and gave sincere suggestions of spending more over the infrastructure and curtail the non productive expense. But he needs to elaborate his suggestions and prioritize the list of infrastructure, which one needs more attention and investment than other in order to achieve timely success in economic and human development.

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Saifur Rahman

Aug 21, 2013 04:30pm

Asian countries that recently came out as development giants (such as Singapore, South Korea and Malaysia) depended mainly on their own knowledge & judgments when it came to economic planning. This is true that they took expert advises from bodies like UN, World Bank or IMF but the final development planning were always delivered by their own people who knew the local environment better than anybody else. Any development; be it human resource, infrastructure or economic must encompass social, cultural, historical and political environment of a country and it is beyond any argument that local planners and engineers are best at doing that. It has been proven time and again that 100% dependence on foreign development model is a recipe of failure. There is no harm to look at the

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A Shah

Aug 21, 2013 05:03pm

What do you mean 'May turn into a disaster?' We have been a disaster since our birth!

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Shaukat Hameed Khan, D.Phil

Aug 21, 2013 06:34pm

I am glad that Vision 2025 is being discussed.

I had the opportunity to prepare 'Vision 2030' in the year 2007 as Project Director and principal author, from the platform of the Planning Commission, where I was one of the statutory Members. Vision 2030 was essentially a foresight exercise which examined the various options available for Pakistan in the 21st C. the date 2030 was selected because the young person born around 2007 would be entering productive life around 2030.

It was also clearly understood that a 'Vision' needs strong ownership from the essential stakeholders, and there would be periodic reality checks, say every 4-5 years.
The basic thrust however was that poverty does not belong in Pakistan in the 21st C, and that our young people have the courage to aim high and for the best ... little historical baggage to pull them down.

It was also clearly understood that the Vision followup requires detailed planning and strategising and determination of costs and timelines.

For instance, most Pakistanis are basically unemployable. How do we protect and nurture our heritage and languages, within an environment which is creating a global 'mono-culture'....and so on. Over a dozen task forces were set up to pursue the problems.

Another Example; The energy crisis offers a potential silver lining. We need to spend some US$ 210 billion plus by 2030; can this be leveraged by creating a power plant equipment consortium in Pakistan? With strategic partnership fro a group of multinational in the field of power plant equipment

It took 18 months to prepare and involved discussions and exchanges with some of the best minds and hearts in Pakistan. However, when I was asked to write the forewords for the President, the Prime Minister, and the Dy Chairman of the Planning commission, it suddenly dawned upon me that the exercise would be futile. I am sure none of them have read it fully.

Sardar Asif Ali who was Dy. Chairman in 2009, surprised me by claiming that he had read it on his weekly journeys to and from Lahore, he got prepared the strategy and plans for Reforms in technical and secondary education. .

I put up all the written reports from the large panel of 'visionaries' on the Planning Commission website. .....still there!

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Jayjay

Aug 21, 2013 10:01pm

Any plan without effective family planning through an amendment in constitution and family planning laws would be farce.

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Ashraf

Aug 21, 2013 10:55pm

Governments in Pakistan that come and go in course of time are not for the welfare of poor people of this country, but that each and every individual from a low level staff to the level of ministers in all governmental departments come to make as much money as he can. Even the projects that they undertake are meant to facilitate making money for all who are involved. A certain party is notoriously famous for being ruthless in looting and plundering the national resources. It is very much doubtful if anything significant, worthwhile will ever get done for the poor people of this country. Unless a divine help comes up, there is no sign of any hope for any relief from the maladies that are afflicting the poor people of this country.
Ashraf

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Ashraf

Aug 21, 2013 10:55pm

Governments in Pakistan that come and go in course of time are not for the welfare of poor people of this country, but that each and every individual from a low level staff to the level of ministers in all governmental departments come to make as much money as he can. Even the projects that they undertake are meant to facilitate making money for all who are involved. A certain party is notoriously famous for being ruthless in looting and plundering the national resources. It is very much doubtful if anything significant, worthwhile will ever get done for the poor people of this country. Unless a divine help comes up, there is no sign of any hope for any relief from the maladies that are afflicting the poor people of this country.
Ashraf

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BRR

Aug 21, 2013 11:30pm

Very interesting take.Not sure if viable. The emphasis is NOT on better tax collection, rather than on limiting waste, fraud and abuse - something that even the US has never achieved.

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Fatima

Aug 22, 2013 12:56am

Asalamualaikum,
i really liked your article. We dont need short term relieves rather we need long term successes. No politician wants to participate in prospering the country rather they want to fill their own pockets. We need a true leader that is honest , patriotic, and thinks about it's people rather than ownself.
Thanks

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Gohar

Aug 22, 2013 01:34am

Did not like the title of this article, could use something less sensational and more professional sounding.

Any economic plan needs to be sustainable and help sustain Pakistan's economic trajectory over the next decade and I am quite hopeful the we will be able to meet those MDG.

In addition to thinking of grand schemes which I think are good ideas as it is ok to aim high and if we fall short, hey thats ok as long as continue to strive to reach our goals. Often times, projects are formulated with lack of foresight. As an example (I know, not the greatest), often times roads are build as 2 lane thoroughfares and within 2 years they are packed, no attention was made towards future expansion and many times it would have been better not to build the road at all until funds were available to make the two lane road into a 4 if not 6 way expressway.

Time has come for Pakistan to develop sustained economic plans and I also feel that large grandiose schemes are also needed on the side as well. Lets approach it from multiple angles!

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Jawad

Aug 22, 2013 06:03am

In a country where rule of law is almost non existent, high levels of district level inequalities with districts having similar human development index levels as Ethiopia, an unaccountable military establishment amidst a "neodemocracy", limited freedom of speech, poor levels of education standards among other issues, investment in infrastructure might not be able to raise GDP levels. For economic growth and higher living standards, I humbly suggest a change in the attitudes of the rulers (which won't come without accountability) instead of a change in economic plannings.

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Sanjeev

Aug 22, 2013 08:31am

All the Asian countries who developed rapidly, did it through educating their population. Countries like Japan, Singapore, Korea, Malaysia, spent lot of funds on schools and colleges to educate the people. Pakistan has lot of man power, but if these poor people are not educated, they can only do manual labour and cannot get out of the poverty trap. Also if the women who are half the population, are not allowed to study, you are loosing 50 % of population who can be productive. Pakistan needs to focus on developing the people through higher education like engineering medicine etc. Spend more money on colleges and not on Nuclear programs.

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sja

Aug 22, 2013 09:36am

"""""Economic development plan: A

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Aarif

Aug 22, 2013 10:12am

@kdspirited:
Probably you are unaware that Mr. Ahsan Iqbal has M.B.A. from Wharton School of business at U.Penn.,an Ivy League University.

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Usman Masood

Aug 22, 2013 10:46am

Nice piece. But it would be great if you write economics more frequently than politics. Of course this article is way better than the sectarianism articles and the despicably titled Islam at war with itself!

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khanm

Aug 22, 2013 11:15am

The world is governed by institutions that are not democratic - the World Bank, the IMF, and the WTO. Our leaders swallow the advice of the Western powers and bodies like the IMF and World Bank, even when it is bad for our country but not bad for their offshore account and they know this.

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Ahmed Zaheer

Aug 23, 2013 03:35pm

Shabby planning and execution can turn anything into a nightmare. So why sensationalize by using this title when you are not even discussing the salient features of this economic development plan?

The sole aim of this title looks like getting more 'views'. Perhaps not many people would have read it if you had titled this as "World Bank's recipe for Pakistan to achieve MDG".